Broker-Dealer Litigation - Greenberg Traurig LLP

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Gilmore v. Brandt, 2011 U.S. Dist. LEXIS 125812 (D. Colo. Oct. 31, 2011).
Following the complete decimation of his investment in what turned out to be a Ponzi
scheme, an investor submitted claims that a FINRA arbitration panel found in his favor. Upon
the investor’s motion to enforce the award, Defendant securities representative moved to vacate
the award maintaining that the FINRA arbitrators lacked jurisdiction over the dispute as
defendant never agreed to submit any dispute with the investor to arbitration. While noting that
the representative should have sought an order to stay the arbitration, the court nonetheless found
that the representative did preserve his objection to the panel’s jurisdiction. Particularly, the
representative appended a statement to his FINRA Arbitration Submission Agreement reserving
all rights to challenge the jurisdiction of FINRA at a later date, and also raised the jurisdictional
objection in both his answer and pre-hearing brief. The court concluded that, despite these
objections, the representative was subject to the panel’s jurisdiction pursuant to his Uniform
Application for Securities Industry Regulation or Transfer (“Form U-4”) that the representative
executed when first seeking licensure to sell securities. Accordingly, the court found that the
representative would be required to arbitrate the dispute if required to do so under FINRA rules.
After concluding that the investor was a customer within the meaning of Rule 12200, and also
that the recommendation fell within the class of disputes wherein the issues are reasonably
related to FINRA regulated activity, the court held that the panel’s implicit recognition of its
jurisdiction was proper and denied the representative’s motion to vacate the award.
Freecharm Ltd. v. Atlas Wealth Holdings Corp., 2011 U.S. Dist. LEXIS 113172 (S.D. Fla. Sep.
30, 2011).
Plaintiff, a FINRA member, brought claims against affiliated companies and their
officers and directors seeking damages following an alleged pattern of egregious
misrepresentations and fraud. The claims were submitted to FINRA arbitration. The panel
entered an award in favor of the respondents and denied plaintiff’s claims in their entirety.
However, approximately two weeks before that award was rendered, plaintiff filed a complaint
in court. Thereafter, the respondents asserted affirmative defenses to every count in the court
complaint, contending that the claims were barred in whole or in part by the doctrines of
collateral estoppel and res judicata. Having concluded that the issues adjudicated were identical,
fully, and fairly litigated, and, further, were necessary to the binding judgment of the panel, the
court found that the doctrine of collateral estoppel barred the claims.
Hantz Group, Inc. v. Van Duyn, 2011 Mich. App. LEXIS 1212 (Mich. Ct. App. June 30, 2011).
Plaintiffs, financial services affiliates, appealed a trial court’s grant of defendants’ motion
to set aside defaults entered against them, and also the court’s order dismissing plaintiffs’ claims
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